The company's 2022 performance forecast is in line with expectations, the net profit per ton of cathode materials remains high, the level of cost control is excellent, and sodium cathode is expected to contribute profits. We expect the company to benefit from the profit growth brought about by capacity expansion and the listing of new products, taking into account the profitability of the company beyond its peers, valuing the company at 19 times PE in 2023, maintaining the company's target price of 20 yuan and maintaining the company's "buy" rating.

The company's 2022 results forecast is in line with expectations, and quarterly profits continue to grow. According to the 2022 performance forecast, the company expects to achieve a net profit of 14-1.6 billion yuan in 2022, an increase of 99.8%, 128.4% and 486 million yuan, an increase of 34.1% and 127.7% over the same period last year.

Sales of Q4 cathode materials are expected to increase month-on-month, and projects under construction are progressing smoothly. We expect 22Q4 to ship about 19000 tons of ternary materials and 67000 tons for the whole year. The first phase of the 40,000 tons / year cathode material project is fully operating at full capacity, and some of the production lines of the second phase of the project are completed and trial running. the company expects 23Q2 production capacity to start climbing, and the annual effective capacity of ternary materials in 2023 is expected to exceed 100000 tons. The company expects 60,000 tons / year lithium iron phosphate project to be put into production in 23Q1 and start production capacity climbing, and shipments are expected to reach 20,000 to 30,000 tons in 2023.

The scale effect superimposed supply chain management, and the profitability per ton remained high. We calculate according to the median profit forecast, the company's net profit per ton of cathode materials in 2022 is about 22000 yuan, and that of 22Q4 is about 20,000 yuan per ton. The company's new production line has been put into use to greatly improve production efficiency, production capacity growth highlights economies of scale, and manufacturing costs are further reduced. The price of 22Q4 raw materials fluctuates greatly. By implementing procurement strategies such as signing long orders with suppliers at the right time, the company ensures a stable supply of raw materials and reduces the risk of inventory impairment.

The sodium positive electrode is recognized by downstream customers and is expected to be in a pilot test in 2023. The company has strong R & D strength, and three kinds of technical routes of sodium cathode are involved, among which the layered oxide route samples provided to downstream customers have excellent performance and belong to the first echelon in the competition. According to the needs of customers, the company will transform an original production line this year for the trial of sodium positive electrodes, and it is expected that it will contribute some profits after it is put into production.

Risk factors: changes in the technical route of the industry; intensified competition in the industry; lower-than-expected demand; substantial fluctuations in raw material supply and prices; capacity construction is not as expected.

Profit forecast, valuation and rating: the company's 2022 performance forecast is in line with expectations, the net profit per ton of cathode materials remains high, the level of cost control is excellent, and the positive electrode is expected to contribute profits in 2023. We expect the company to maintain a high level of profitability and benefit from the profit growth brought about by capacity expansion and new product offerings, maintaining the company's 2022-24 forecast return net profit of RMB 1551x209pm, corresponding to the 2022-24 EPS forecast of 0.80pm 1.04pm 1.24 per share. At present, comparable companies in the cathode materials industry (Xiamen Tungsten Xinneng, Dangsheng Technology and Zhenhua New Materials) have an average PE valuation of 15 times in 2023, taking into account the company's profitability beyond its peers, maintain the company's 19 times PE valuation in 2023, maintain the company's target price of 20 yuan, and maintain the company's "buy" rating.